Entrepreneur’s Guide ; Legal Requirements for Starting a Business in Kenya
Many businesses; big and small alike have collapsed for failing to operate within the confines of the law. The government is a key stakeholder in business operations as it forms the backbone of an economy. As such, to effectively maximize government goodwill, a business should be duly registered and fully compliant with legal requirements. Compliance also steers you clear of the risk of getting your business embroiled in legal disputes and some cases resulting in closure.
In this post, we highlight the steps required to legally set up your business in Kenya.
Registering Your Business
First things first, as a business owner you need to research and secure a new and unique business name that has yet to be previously registered by a different entity. Other conditions include; that the name should not be offensive and should not contain prohibited initials and abbreviations.
Documents that need to be submitted to the registrar of companies include; business name reservation certification, statement of nominal capital, memorandum, and articles of association.
Depending on the ownership, liability, control, exit plan, and the invested capital the business can either be registered as a sole proprietorship, limited partnership, unlimited partnership, limited liability company, a branch of an international company, or a public limited company. For a business name registration, the following credentials must be availed;
The Business Name
The Nature of Business
Land Reference Number/Plot No
Full Names of the owner as shown on your ID or Passport
The good news is the process is now entirely online through the e-citizen portal.
Obtain statutory requirements
All business owners need to acquire a work permit and be registered with the Kenya Revenue Authority, National Hospital Insurance Fund, and the National Social Security Fund.
The KRA issues a Personal Identification Number that is used in filing returns and in conducting business transactions. Taxes include the Value Added Tax, Pay As You Earn, and Excise duty.
The role of the National Social Security Fund is to provide employees with retirement benefits by acting as a public trust.
The National Health Insurance Fund on the other hand provides medical insurance cover to contributing members in government-accredited hospitals.
Registration with the National Industrial Training Authority (NITA)
All employers are required to register with the National Industrial Training Authority. Its mandate is to promote the highest standards in the quality and efficiency of Industrial Training in Kenya and ensure an adequate supply of properly trained manpower at all levels in the industry.
Consumer protection laws
Your business operations need to align with certain consumer laws and policies, depending on your industry of operation. Consumer protection in Kenya falls within the purview of the Competition Authority of Kenya.
Employment and labour laws in Kenya
In Kenya, there is a legal framework that dictates the obligations of employers to employees and vice-versa. The Employment and Labour Relations Court oversees all work-related disputes. As a potential employer, you will need to familiarize yourself with stipulations such as;
Minimum wage requirements-The minimum wage requirement ensures that all employees can meet their basic needs and afford a decent standard of living.
Working hours and overtime arrangements-maximum working hours are capped at 52 hours a week. Overtime is compensated at 1.5 times the normal hourly rate. Employees are also entitled to a rest period of at least one day in a week.
Health and safety includes providing a safe working environment complete with protective equipment where needed to prevent accidents and injuries.
Non-discrimination and fairness in hiring and termination
Legal compliance will set your business up for success. If unsure of how to navigate the legal framework in regard to business operations, kindly reach out to us for a business consultation that will prove valuable to your business.
Written and compiled by: Joy Njeri Waweru